FIREside Chats

Busy_Mee

I hadn't realised what FU meant. Thought it was another financial acronym  Well I suppose it is 

Cheery_Daff

edinburgher said:

One of my favourite rules of thumb in personal finance is the rule of 72 (i.e. divide 72 by your expected rate of return and that's how long it will take your money to double).

I decided to combine the rule of 72 with my love of takeaway breakfasts from the lovely eateries that have sprung up everywhere in Glasgow (the joy of living near a major city). I spent £15.50 on breakfast for Mrs E and I. As it's (hopefully) 20 years 'til I retire, I have decided to gift future me (another personal finance concept that makes me smile) a tasty breakfast in 20 years time. I'm happy that I'll achieve 3.6% net over 20 years, so £15.50 / 2 / 1.25 (pension tax relief) = £6.20 paid into the SIPP.

I didn't start this thread because I'm not a personal finance nerd

Ha, love this! 

And yes, of course you are allowed grated cheese 😁 We all economise where we can and are willing to. I'm pretty sure all of us do things that other people would disapprove of, or at least wouldn't do themselves.

 I buy tinned beans now instead of dried ones, because I just got sick of the hassle of soaking them. I know some people think I still should soak them - and some other people think I was ridiculous for soaking them in the first place 🙄😂

I also 'economise' by never cleaning the car, and not washing my clothes as often as some of you might 😂 On the other hand, I spend far too much on cafe breakfasts (although I do note my favourite local cafe breakfast is cheaper than edinburgh's!)

ruby_eskimo

Glad I'm not the only one who doesn't really clean their car @Cheery_Daff I was very disappointed when they didn't clean it at the garage when it went in for it's service last year!  I'll gladly economise there (and I've started soaking my beans now too!) but I spend more on toiletries than most people here I think.  In my defence, not that I think I have to defend my choices, I have sensitive hair and skin and unfortunately the only things that work for me cost a little more than I'd like to spend and I begrudge handing over the cash every few months, but it does fit into my budget so it's not the end of the world, but I see my husband thriving on his £1 shampoo and body washes and get a little envious that I have to pay £8 for a shampoo and £10 for a body wash!  

Enough of a rant, back to finances - I've received an update on the NHS pension judgement around the different schemes that I'm a member of.  Looks like we won't have to make a choice over which scheme we want to count 10 years worth of benefits in until we reach pension age , but as the pension age for each scheme is different, I'm still none the wiser.  Apparently we'll be getting individual updates in April next year so going to have to wait and see what happens there.  In the meantime I'm stuck in a loop between opening a SIPP and a S&S ISA - can't work out what the tax implications are going to be, but leaning more towards the flexibility of the ISA *just in case*.  Why do these things have to be so confusing!

Suffolk_lass

How funny that we are onto what we spend our money on - it really is an entirely personal thing and I apologise if I sound(ed) smug in any way - genuinely sharing things I have found hard to learn about to help others spend less time prevaricating than I do. 

Suffolk_lass

ruby_eskimo said:

Glad I'm not the only one who doesn't really clean their car @Cheery_Daff I was very disappointed when they didn't clean it at the garage when it went in for it's service last year!  I'll gladly economise there (and I've started soaking my beans now too!) but I spend more on toiletries than most people here I think.  In my defence, not that I think I have to defend my choices, I have sensitive hair and skin and unfortunately the only things that work for me cost a little more than I'd like to spend and I begrudge handing over the cash every few months, but it does fit into my budget so it's not the end of the world, but I see my husband thriving on his £1 shampoo and body washes and get a little envious that I have to pay £8 for a shampoo and £10 for a body wash!  

Enough of a rant, back to finances - I've received an update on the NHS pension judgement around the different schemes that I'm a member of.  Looks like we won't have to make a choice over which scheme we want to count 10 years worth of benefits in until we reach pension age , but as the pension age for each scheme is different, I'm still none the wiser.  Apparently we'll be getting individual updates in April next year so going to have to wait and see what happens there.  In the meantime I'm stuck in a loop between opening a SIPP and a S&S ISA - can't work out what the tax implications are going to be, but leaning more towards the flexibility of the ISA *just in case*.  Why do these things have to be so confusing!

@ruby_eskimo as I think ed said, SIPP gives you the tax relief on the money as you put in (especially very helpful to anyone the wrong side of the higher rate tax-payer income threshold) but you must consider tax if you take money out (currently after age 55 - 25% tax free then the rest falls into your normal personal tax allowance, whereas your ISA make the contents tax-free but on money you have already paid tax on. 

Your friend, Justin Case, means you should consider the likelihood of needing to draw on that money before the minimum age you can start to access SIPP without tax liability on what you put in (plus interest from that date) being incurred. 

QueenJess

Suffolk_lass said:

How funny that we are onto what we spend our money on - it really is an entirely personal thing and I apologise if I sound(ed) smug in any way - genuinely sharing things I have found hard to learn about to help others spend less time prevaricating than I do. 

I think the key is spending money on the things that matter to you. I begrudge money spent on electricity and other unexciting bills and so will minimise those. I am perfectly happy to pay more for good quality food and do love my organic veg/fruit box delivery. 

No point in spending money on things you don't value. That is a waste 🙂 I also don't clean my car, but it annoys DH who takes it for hand washes for me (and pays). Works for me!

ajmoney

It appears this thread may have been set up at the right time for me.  I am in the very fortunate position that I am about to get a payrise, unfortunately it is not getting backdated to when other areas got theirs but it is better than nothing.  I think it will equate to around £140 a month although I am unsure in real term with tax, NI etc.  I had a chat with a colleague this morning who has set up a personal pension as I am wondering whether to do this but I confess I get a little confused (read A LOT) by things.  If any of you answer please use really simple speak as I do want to understand, at 42 I am maybe a little late to start anything extra. So here go some of my questions...

1. I already have a cash and S&S ISA so how do these sort of things get funded?

2. What are the differences between funding in something that is pension specific and investing more in my S&S ISA?

I am sure I will think of more questions but in the meantime I am going to see if I can find anything to read online that isn't full of loads of abbreviations and things that I perceive to be far above my understanding.

edinburgher

As I'd mentioned on your own thread @ajmoney, the differences are largely around the accessibility of money and when tax is paid.

With a pension, you get tax relief on the way in (20%, you have to claim back the Rest on a tax return if you're a higher rate tax payer I believe). You're taxed on the way out at your marginal rate (but you can take 25% of the whole pot or of each withdrawal tax free). Personal pensions can typically be accessed at normal retirement age minus 10 (so I'm expecting 58).

ISAs get no tax relief on the way in (although there is an uplift for a lifetime ISA (LISA, which sits somewhere in the middle and is relatively unpopular). You can access ISAs whenever you want, LISAs at 60.

A pension gives you jam today, but tax tomorrow. I quite like pensions as I have a long timeline and like the tax relief as it gives my investments a better chance of growth.

You can invest in the same funds in both should you wish to do do, they are both just wrappers to hold investments that behave slightly differently

becky_rtw

Great summary @edinburgher

gallygirl

Tartan_Mum said:

I have a confession to make 😳 

Sometimes I do buy grated cheese especially mozzarella for home made pizzas. 

Do I need to turn in my MFW wings? 😱

Yes. Stand in the corner wearing (home knitted) sackcloth and ashes

That was just an example plucked from the air, and I know some people who buy grated cheese because of arthritis/energy issues. It really about mindful spending - if it costs an extra pound a week is it worth 52 a year, 520 (plus interest) over 10 years etc.? There comes a point where we say 'yes, actually, it bloody well is!!!!!' ....... but the 4 pound daily coffee habit isn't. FWIW I don't think I've ever bought grated cheese but it's only recently I've soaked dried beans!